‘How regulatory agencies are killing businesses’ – Mallinson Ukatu is the Managing Director/CEO, Mallinson and Partners. In this interview with Emmanuel Udodinma, he speaks on the challenges faced by the manufacturing sector, amongst others. Excerpts:
The land use charge policy by the Lagos State government led to heated debates with businesses seeking a review. How does this policy affect you as a manufacturer?
The law is not favourable for manufacturing industries. The argument here is that in some areas where the manufacturer has constructed road, provided water and carried out maintenance on his factory, the individual is expected to receive returns on income tax for project done but does not get any returns. We have paid tenement rates to Lagos and Ogun state governments, but it was cancelled, on the grounds that the payment was for land use charge.
Most times, the governments tax manufacturers based on the sizes of their property or the locations of their property. They don’t consider whether the manufacturers have made profits. They come with police officers to harass and intimidate manufacturers. They don’t consider how much you spend in running the facility, paying workers and staying in business.
The situation is pathetic for us especially when you consider that much of the monies used in running the businesses are either loans from commercial banks and the Bank of Industry (BOI) which we have to repay with interest. The increase of the land use charge was aimed at generating more revenue for government. The continuous taxation without adequate provision of incentive is not in the best interest of manufacturers, especially when you consider that they are making frantic efforts to create jobs, drive growth and produce goods and services to serve the economy.
The removal of the penalty regime provided additional relief to all property owners; other rates and reliefs, apart from the ones stated above would remain unchanged and would be implemented as stipulated by the law. Owners of property across all categories will now be allowed to make payments by instalments. This will help to reduce the burden of taxation on our citizens.
These managers engage in taxing the people. On two occasions, they have sealed up my factory because there was no proper notice. We paid the tenement rate; they said it’s for local government council, while the land use charge is for the state government. Initially, tenement rate was what we were paying before it was changed to land use charge. In one year, we paid the tenement rate and the land use charge.
How is double taxation affecting your production?
Double taxation is a serious issue facing the sector. However, we are discussing with consultants to understand the dynamics involved. I feel personally that there should be proper enlightenment from government on how to harmonise on the issue of double taxation. Proper enlightenment requires that manufacturers understand what the taxes they pay are used for. It does not make sense for a manufacturer to continue paying taxes when he is recording losses.
We have made it known to the government to step down the double taxation for manufacturers in order to allow more people to come into the business. Double taxation is chasing people out of business and it is not in the best interest of industrialisation. We are making efforts to reduce the importation of fake goods into the country by ensuring that we produce more goods for government and the economy.
The challenge is that there is no encouragement from government to motivate new people who want to come into manufacturing business. 80 per cent of producers are not happy with the situation of this double taxation. For instance, for someone who resides in Lagos State and has a small business, also has a factory in Ogun State. The individual pays tax in Lagos and Ogun states. Is it supposed to be that way? There must be a good enlightenment from government on how to harmonise the issue of double taxation.
You recently accused the Standard Organisation of Nigeria, (SON), the Nigeria Customs Service (NSC) and other regulatory bodies of becoming revenue generating bodies rather than regulatory bodies; what made you describe them that way?
Raw material is very crucial for production. Due to the infrastructural inadequacy, the Nigerian economy is not able to produce the raw materials needed for industrial production. We are not pleased with certain payments made to these agencies because some of these payments are arbitrarily high. We pay so much to have a Form-M.
In the area of SON CAP from overseas, we are paying 80 to 100 per cent higher. There are cases where they remind the manufacturers that they don’t pay at a particular period, and then their containers are held for a particular period. These charges are excessive.
The operations concerning imported raw materials are still analogue. When an individual has the Form M and has done the SON CAP and provided some information that he is a registered manufacturer, there is no concession given to him. During the goods examination by Nigeria Customs Service (NSC), manufacturers are not able to ascertain if the goods are 100 per cent genuine.
There was an incident that happened when we imported the re-factory blocks. Re-factory block is what is used in heating level for furnace. Similarly, it is more of finished tiles. We argued that it was raw material not finished goods, but we ended up paying the duty that was not meant for it.
People who are not in the business will end up classifying it as tiles and there is no regulatory body that will stand for you to say it is not tile material. The longer you leave those containers, the higher the demurrage you end up paying. We have a system that is not automated; they still carry out manual examinations on the containers to ascertain what they are carrying. This takes a lot of time and affects production. Some of the things declared are real things for manufacturers, whereas some are out there arguing that it is not true. Some of the things that are not done right are duty declaration and HIS code.
There is always an argument about items imported. Therefore, there is need for the inclusion of the members of the Manufacturers Association of Nigeria (MAN) in anything related to manufacturing in the port. This would go a long way in addressing the issue of manual examination at the ports. If the National Agency for Food and Drug Administration and Control (NAFDAC) can be in the ports, sometimes to check the raw materials, the MAN can also be at the ports to check the raw materials and let these regulatory agencies know that it is a material for production.
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